All indications are that many industries will soon be facing a very serious problem. It concerns the high and constantly rising prices of one of the key raw materials on the market.
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Copper currently costs around USD 8 500 per tonne. However, according to Fitch Solutions researchers, its prices could reach the level of USD 10 000 later this year and break through the USD 15 000 per tonne mark in 2025. If these predictions come to fruition, the previous record of $10,73,000 per tonne recorded on the London Metal Exchange in March last year would be surpassed.
Unfortunately, it will get more expensive
The problem is that the aforementioned predictions have a good chance of coming true. However, it can't be otherwise, since the demand for copper globally is steadily increasing.
Growing environmental awareness and successive programmes related to the development of renewable energy sources automatically raise demand for the raw material to unprecedented levels. Copper is, after all, a key ingredient in the production of, for example, wind turbines, new power grids or electric cars, which are becoming more and more promoted every year and are expected to eventually displace oil-powered vehicles.
What's more, all these changes are spelled out in specific agendas, be it COP28, which was signed by 60 countries, or the EU's Energy Neutrality Directive, which must be achieved by 2050. The formal side of the changes means that these will no longer be just a matter of choice, but a very concrete step of behaviour by the countries that have agreed to them.
Chain reaction
The other side of the coin in the case of rising copper prices is the accumulation of all the unexpected events that are unfortunately taking place at the same time.
For it is worth remembering that the world has not been operating in the way we knew it before for a good few years. Pandemics, successive wars and minor conflicts, superpowers clashing with each other - all of this contributes to copper mining, and let us recall that its biggest exporters are Chile, Peru, China or Russia. Interestingly, one of the leading miners, Cobre Panama, has recently announced that it will reduce its copper production in 2024 and 2025 to lower its costs.
The weakening position of the dollar is also an issue. This, in turn, could get even weaker as the Federal Reserve (FED) slowly prepares to cut interest rates, and this in turn will mean that copper will become even cheaper for foreign buyers.
Many countries and entire industries, including those related to automation, will feel what happens in the coming months. Copper will become scarcer and scarcer, the demand for it will increase, as will the turmoil on the geopolitical chessboard. Cheaper, therefore, it has already been... quietly too.
